SPRINGFIELD Properties has reported an 80% fall in interim pre-tax profits to £1.2 million after continuing to grapple with challenging market conditions, but said it was on track to meet market expectations for the year.

The Elgin-based housebuilder suspended dividends in September and embarked on a strategy to sell tranches of land to raise cash in response to the upheaval in the housing market, which followed the rise in interest rates and cost of mortgages.

On Monday, Springfield said it had raised £8.7m from the sale of around 11.2 acres in its latest land disposal to reduce debt, revealing that it was in “advanced” talks with regard to further sales. The company has now raised more than £18m from land sales since October and while more deals are being negotiated the company said its land bank would remain strong and one of the biggest in Scotland.

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Asked to comment on the progress made by the strategy to date, chief executive Innes Smith said “we are on track with where we want to be”. He told The Herald: “The actions we took at that point were necessary to get us to a point at the end of the year. Obviously in September we knew what the results were going to be to the end of November. Now we have got some substance behind our confidence in hitting the year-end projections.

“Sales have picked up January [and] February, which is a good signal, and that has been echoed by all housebuilders across the market. And in Scotland there has been positive house price inflation over the past year, so we are doing better than the rest of the UK just now.

“[There are] reasons to be positive, although you have got to be cautious at the same time. We have been picking up a lot of affordable [housing] contracts and had some good business in that in the last few months.

“We have managed to sell the land competitively. We have had a lot of interest in our land, we have managed to achieve our targets on that side, as yesterday’s announcement of a £9m sale backed up. Fingers crossed the private rental sector picks up now that the government has changed its mind on rent caps and the like.”

Mr Smith added: “There are reasons to be optimistic but we need to focus on getting the debt down and getting the business in a strong position so we can take advantage of things going forward.”

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This morning, the company announced revenue had fallen by 25% to £121.7m in the six months ended November 30, having completed 432 homes compared with 673 in the first half of the year before. Revenue fell as it entered the year with a lower order book because of challenging market conditions.

Springfield said private housing demand continued to be impacted by high interest rates, mortgage affordability, and reduced homebuyer confidence in the first half, as revenue tumbling by 26% to £87.7m. However, it declared that private housing reservation rates have shown signs of recovery since the start of the calendar year.

Mr Smith said: “It’s consumer confidence, isn’t it? It is psychological. While interest rates were going up, people were waiting to see what impact that would have. Then when interest rates flattened and mortgage rates started to come down, people started to get concerned that house prices could increase again, so they needed to get back into the housing market.

“I think seeing inflation starting to come down – [it was] 4% last month – and forecast to [fall to around 2%] by the end of the year gives everyone a bit more confidence on job security and not seeing your monthly outgoings increase at an exponential rate. The general feel is that the economy is getting to a better place. It has been a tough time over the last two years since the mini-Budget happened in September 2022.”

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Asked if there was a specific end point to Springfield's current programme of land sales, Mr Smith said: “We built up a lot of land over the last five years with some of the acquisitions we made. We’re in a position where we are able to sell that land, make it liquid and there will be some profit in those land sales as well.

“The key is getting the debt down. Once where we get the debt down to where we want it to be, which is £40m by the end of 2025, a very manageable number, then we won’t need to do that anymore.

“Ultimately, we want to build on the land that we have got, but when we acquired some of the businesses there were some chunky bits of land. What we are doing is really reducing the working capital. It’s on sites that are fairly significant in size and won’t actually affect our own plans for the next two to three years.”

The company said its land bank totalled 6,421 plots on November 30, down from 6,712 on May 31.

Springfield reported that revenue from affordable housing sales fell by 9% to £25.4m in the six months to November 30, having re-entered the market last year when the Scottish Government increased its affordable housing investment benchmarks. The company reported that it had signed around £40m of affordable contracts since May 31 for delivery in the second half of this year and beyond. It said demand for affordable housing remains strong and that it was confident of signing further contracts in the near term.

The company said dividends would be paused until its bank debt has been materially reduced.

Springfield is on track to reduce net debt to around £55m by May 31 this year. Neb debt on an unaudited basis stood at £98.7m on November 30.

Shares closed the day down 0.5p at 77.5p.